1. Redlining Historically
Redlining is the practice of denying services or assistance to specific neighborhoods along racial lines. The Federal Housing Administration (“FHA”) orchestrated the most famous form of redlining practices. The FHA would withhold (or make it very difficult) mortgage capital from minorities who applied for home loans in white neighborhoods (See Boston Fair Housing). This explicit discrimination concentrated minority poverty in the inner city and exacerbated racial segregation in the United States. The practice expanded to private mortgage lenders as well, which further exacerbated these issues. In the 1960s courts began to find the practice illegal, and then in 1968 Congress passed the Fair Housing Act of 1968 to further combat the issue. However, the practice continues to persist and it has expanded into more areas than just housing. Specifically in Michigan, the practice has expanded into car insurance.
2. Redlining in Michigan Auto Insurance
In Michigan, car insurance companies are allowed to charge different rates for different individuals. Several studies and investigations have found that car insurance companies charge more for individuals who live in predominately minority areas (Read here, here, or here). The practice does not specifically target individuals based upon their race; rather, it targets individuals based upon their geography. But the geography that faces higher rates are also areas with high minority populations. Detroit is a city that is 90 percent non-white. The City also faces the highest auto insurance rates in the state (and even the entire country). Flint, which is a city that is 63 percent non-white, also faces higher auto insurance rates then the rest of Michigan.
What you have is racial discrimination hidden as geographic discrimination. Just as housing lenders in the 1930s, 40s, 50s, and 60s restricted capital to minority borrowers based on geography, today car insurance companies are restricting access to car insurance to minorities based on geography. The practice needs to end.
3. The Problem and the Solution
As detailed above the problem is straight forward-ending the practice of geographic discrimination for car insurance in Michigan. By using design thinking and starting the the problem first, I developed what I believe is a practical solution-awareness.
The Michigan legislature has tried to end the practice of car insurance redlining. Most recently the legislature tried in 2017. However, the bill was defeated and the practice continues. I believe in advocating with local legislators to end this practice; however, I have my doubts about advocacy’s success since many people have tried to advocate to stop this practice.
What I propose is a website called “howracistisyourcarinsurance.com” which would catalog the various rates that car insurance companies charge for different geographic areas. The idea would be to shame each insurance provider and have them compete with each other to eliminate redlining practices to eliminate their public shame. The website would need significant time and investment, but if it caught on it would promote competition amongst each insurance provider. Presumably the “most racist” car insurance provider would lose money and then try to lower its ranking. Each provider would follow suite until there is no more redlining practices going on in Michigan.
